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In this paper, we investigate how dominant the U.S. dollar is in various aspects of financial transactions and instruments. First, we graphically illustrate that to date, no credible currency has emerged as a competitor to the U.S. dollar. We then conduct formal regression analysis of the factors affecting the share of use of international currencies in various types of financial transactions. The regression estimations show that there is commonality in the factors for the currency shares among different financial aspects. Economic size contributes positively to the currency share, so does the level of economic development. Furthermore, we confirm that commitment to a free-flowing but relatively stable currency, and open, thick, and liquid financial markets are positive factors. We also find that institutional transparency and a strong and predictable legal system contribute to promoting the establishment of better-developed and open financial markets, which help increase the use of an international currency of interest.
